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'The current slump in markets should be viewed as a buying opportunity'

Kothari Pioneer Infotech was the first information technology fund in the Indian mutual fund industry. In the brief history since its launch in August 1998, the fund has been on a roller-coaster ride, mirroring the volatility in the technology sector. Like its peers, the fund has lost heavily in the tech carnage with a one-year loss at 66 per cent on March 31, 2001. Yet, for the initial investors, the return since launch is a rock-solid 50 per cent with three dividends and a bonus. Fund manager R Sukumar declares that the fall should be viewed as a buying opportunity with focus on top-rated stocks to Aabhas Pandya.

Has there been any change in your investment strategy, given the carnage in technology counters?

Our investment strategy was to focus on top-tier IT companies in India given their strengths and fundamentals. We have always maintained that the market would consolidate and second/third-rung stocks will be the ones that will be affected by such consolidation. Given this, our strategy has remained the same and we feel that the current slump in markets should actually be viewed as a buying opportunity. We did make some adjustments to our portfolio and reduced exposure to NIIT given the deterioration in its fundamentals.

How does the fund narrow in on a stock in terms of parameters?

We look for stocks, which have the ability to create wealth over the long term. We keenly monitor the free-cash flow generated as this gives an indication of the ability of the company to sustain/improve its competitive position.

Given the concentration levels in the top stocks, the need to get the right picks just multiplies. What are the risk containment measures that the fund follows?

The only way to contain risk is to do an in-depth analysis of companies and stick to fundamental research. We have a thorough process for selection and review of our portfolio picks, which helps us in changing our portfolio mix well in advance before the market reacts.

Kothari Pioneer has maintained an average 20 per cent exposure to Infosys in the last trailing half year. How does the fund view the scrip after the sharply lower projected growth numbers for this year?

We still continue to maintain a high exposure to Infosys as we are confident of the medium to long term prospects of the company. The low guidance figures for the current fiscal is not a great concern as we don't see one year altering the long term cash flows and growth rates. We are confident that the company will be able to match up to its earlier projections in the long term.

Now that the quarterly results have started coming in, the impact of the global meltdown is being felt. What is your outlook? And what is the strategy that KP Infotech is going to adopt to move forward?

The global meltdown in tech stocks seems to have hit the bottom and stocks of good companies with long term potential have rebounded sharply world over. Similarly, in India too companies with a higher exposure to offsite projects and R&D services should be able to weather any storm. Our strategy in view of the recent sell-off would be to buy into quality stocks and stay invested. Once the fog rises, markets are sure to recognise the inevitable long-term growth story of the technology sector.

Source: Value Research

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